February 26, 2013

Board Members Present:

Paul Schiffino, Chair; Joan Hancock, Vice Chair; Mark Thurman; David Dias; Matthew Kelly; Ed Lang; James Miller; Lisa Miller-Strunk; Bruce Rust; Frank Schetter; and Pastor Herrera Jr.; John O'Rourke

Board Members Absent:

Robert Lamb

CHAIR'S REMARKS/BOARD MEMBER COMMENTS

Employee Jane Kreidler, the Outreach Coordinator for the Public Affairs Office, recognized and given a certificate for her exemplary work.

Chair, Paul Schifino, a contractor himself, talked about what he sees as an uptick in construction projects. As a result, he anticipates that the construction industry as a whole will start to move back in the direction that it once was. As such, the CSLB should be ready to deal with the increase in construction activity.

Boardmember, Lisa Miller-Strunk, attended the graduation of Peace Officers John Anderson and Bernard Lim. While boardmember, Pastor Herrera, attended the graduation of Peace Officer Vicky Coore.

PUBLIC COMMENT SESSION

The Board heard public comment from Karen Hughes, Brad Diddy and Davy Rodriquez.

ENFORCEMENT COMMITTEE REPORT

ENFORCEMENT PROGRAM UPDATE

Intake and Mediation Centers (IMC)

The Intake and Mediation Centers financial settlement amount for the 2012 calendar year was $8,512,033.78.

Contractor Claims Pressure to Use Uninsured Workers

A contractor who had an exemption from workers' compensation, claiming to have no employees entered into a contract where he said he was pressured into using day laborers by the homeowner to get the project finished on time. The homeowner filed a complaint due to delays and poor quality work. The contractor's exemption has been suspended and the case has been transferred to the intake center for further action.

Construction Dust Causes Large Settlement

A contractor had a job at a surgery center due to flood damage. The surgery center filed a complaint stating that due to dust particles, the machines are no longer operable. The contractor agreed to not charge for the work (there were no problems with the workmanship) and to pay out money to satisfy the customer and keep his good history with the CSLB.

Settled Complaints in the IMC

The Board has exceeded its goal of having 30% of licensee complaints with restitution paid to the financially injured parties with an average of 38%.

The Board almost met its goal to have 70% of licensee complaints disposed with an average of 68%.

Investigation Centers (IC)

The financial settlement amount for the Investigation Centers for the 2012 calendar year was just over $4.1 million.

CSLB Staffing Challenges in Bay Area

Due to the high cost of living in the Bay Area, over the years the CSLB has had to close two of their Investigative Centers (San Jose and Oakland) with some of the positions being transferred to the Sacramento Investigative Center. The CSLB has not been negatively affected in the East Bay due to the staffing challenges, but they are not able to efficiently investigate complaints in the North Bay, San Francisco, the Peninsula and South Bay areas. CSLB is currently trying to fill vacant positions in the San Francisco Investigative Center, but due to the high cost of living they are having trouble filling these vacancies. CSLB may be forced to close the San Francisco branch, which means they will lose all presence in the Bay Area. The only solution they have been able to come up with is having staff travel from the Sacramento branch to the Bay Area.

CSLB's Latest Peace Officers Graduate from Academy

Three new peace officers have graduated from the academy and can now start their job duties as CSLB peace officers.

Two Contractors and an Engineer Stipulate to Revocation of Licenses

Two contractors entered into a contract with a homeowner to landscape their residence, which included building a pool. The pool contractor hired an engineer to do soil testing but the engineer never actually performed soil testing; he just stamped the reports approved. The other two contractors did faulty work that needed to be re-done completely. During the CSLB's accusation process, the two contractors eventually agreed to have their licenses revoked and the engineer agreed to surrender his license. In addition, the owners settled other monetary disputes civilly through the contractors' general liability insurance companies.

Central Valley Operator Arrested

A contractor has been arrested and is being prosecuted for unlicensed contracting, felony misrepresentation of a license number and illegal advertising.

Pending Complaints

Enforcement Representatives continue to surpass the CSLB's objective of nine closures per month

Aged Cases

The Investigative Center staff continues to meet their goals and expectations of having 100 or fewer aged complaints, even though they have been short staffed in some of the Investigative Centers.

SWIFT Highlights

Unlicensed Operator Gets Jail Time

An unlicensed operator admitted to charges that he contracted without a license, failed to secure workers' compensation insurance for his employees and failed to register an employer with the EDD. He was placed on misdemeanor probation for three years, ordered to serve 40 days in county jail, pay more than $15,000 in fines and is not to contract without a valid contractor's license.

Unlicensed Operator Fails to Comply with Stop Order

A SWIFT investigator issued a Stop Order to a contractor who had employees but did not carry workers' compensation insurance. The contractor did not obey the Stop Order. The contractor eventually plead guilty to failing to obtain workers' compensation insurance and was ordered to three years of informal probation, court fines and to obey all laws and Labor Code requirements.

Training Update

The Enforcement division continued their training in 2012. The training included Basic Investigate Techniques, Interview Techniques, Bankruptcy Case Law & Impact on Enforcement, Advanced Negotiation, and Elder Abuse Training, to name just a few.

2012 Construction Enhancement Project

The CSLB teamed with the Employment Development Department starting in January 2012. During 2012, there were 1,490 inspections that took place which resulted in an estimated $68 million in unreported wages being identified. This exceeded the CSLB's established goals.

2012 Outstanding Tax and Civil Liability Suspension

The CSLB has also partnered with Employment Development Department (EDD), Franchise Tax Board (FTB), Department of Industrial Relations (DIR), Division of Labor Standards Enforcement (DLSE) and Division of Occupational Safety and Health (DOSH). Together they have suspended 877 licenses for more than $25 million in unpaid outstanding liabilities. This has also resulted in payment of more than $10 million to the various agencies.

EDD Outstanding Tax and Civil Liability Suspensions

In 2012, the EDD was able to collect over $25,000,000 in liability suspension and over $10,000,000 in tax liability recovered.

DIR Outstanding Civil Liability Suspensions

Also in 2012, the DIR was able to collect over $2,500,000 in liability suspension and over $2,000,000 in penalty recovered.

Operation Underground

In June, 2012 the CSLB partnered with various agencies to conduct underground investigations in various counties. The two day results included 24 CSLB citations, 16 Stop Orders, 11 warning letters, 41 EDD audits, and 23 CDI actions.

REVIEW AND APPROVAL OF DISCLOSURE BY CSLB OF A PARTNERING AGENCY'S DISCIPLINARY ACTION

The CSLB is most interested in partnering with other agencies, such as EDD, by sharing information though common website links so that the general public can find out more information about licensed contractors.

PUBLIC AFFAIRS COMMITTEE REPORT

PUBLIC AFFAIRS PROGRAM UPDATE

Staffing Update

The Public Affairs Office is now fully staffed with six full-time positions since two vacant positions were filled in November.

Website Highlights

Website Assistance Project

To allow for timely posting to the CSLB website, the Public Affairs department has been working closely with the Information Technology staff to code press releases, industry bulletins, and many more items to the website.

Application Instructional Video

Public Affairs has finished redesigning their webpage and adding a tutorial video that shows how to fill out the license application correctly. There was focus on parts of the application where CSLB had identified high error rates. So far, it is still too early to tell the effect that the video will have on the rejection rate.

Social Media

CSLB has been continuing to gain followers to their Facebook and Twitter pages. In addition, they have a YouTube page which includes educational materials, videos of Board meetings and sting operations.

Email Alert Feature

CSLB is continuing to grow their email subscriptions for their newsletters, press releases, consumer alerts, industry bulletins and public meeting notices and agendas. All of the lists are growing at the same rate, with the most subscribers to the newsletters.

Media Relations Highlights

Media Calls

From December 1, 2012, to February 6, 2013, Public Affairs responded to 21 different media inquiries and had interviews with newspapers, radio and television outlets.

News Releases

From November 26, 2012, to February 6, 2013, Public Affairs aggressively distributed seven news releases to publicize mostly their sting operations and enforcement actions.

Industry/Licensee Outreach Highlights

California Licensed Contractor Newsletter

The winter edition of the newsletter is available online. CSLB is currently working on the spring 2013 edition which should be available in March.

Industry Bulletins

Since the last Board meeting, three new Industry Bulletins were sent via email. These are sent out on an as needed basis.

Publication Highlights

CSLB has completed four publications, with several other publications currently with various offices before being completed. The completed publications include the 2013 Contractors License Law & Reference Book and Commonly Used California Codes for Peace Officers (for Enforcement staff).

Community Outreach Highlights

Senior Scam Stopper Seminars

There has been an increase in interest for the Senior Scam Stopper seminars since promotional information was sent to legislators in September of 2011.

Consumer Scam Stopper Program

This program started in September of 2012. These seminars are for all ages and audiences. Since the last Board meeting one seminar has been conducted with four more planned for this year.

Speakers Bureau

CSLB speakers are continuing to be in demand. The most popular requests are for enforcement related topics.

Contractor Outreach Program

The contractor outreach program objective got Board approval on April 17, 2012.

Program Goal

The goals of the program are to provide licensees with tools they can use to educate consumers/potential clients; and to provide licensees with resources that will help ensure that they are aware of laws and best business practices. This should help to aid in the fight against unlicensed contractors and give the law-abiding licensees a more competitive business platform.

Campaign Elements

Campaign elements include conducting research, developing/updating print & web materials, developing an online contractor resource center and developing videos. Currently an online survey has been completed and Public Affairs has started developing outreach materials as well as prospective logos.

Next Steps/Timeline

The next steps are to develop a State of California Licensed Contractor logo, build a website feature to display new/updated materials, launch new contractor resources on CSLB website, determine other program elements and determine if outside contracts are needed.

LEGISLATIVE COMMITTEE REPORT

LEGISLATIVE PROPOSALS TO AMEND THE BUSINESS AND PROFESSIONS CODE

Illegal Use of License Information - B&P § 7027.3

This would allow the CSLB to take administrative actions for violations of the specified provisions in Business and Professions Code section 119. It would allow the CSLB to issue administrative citations regardless of if the district attorney pursues the violations.

Definition of Unlicensed Activity - B&P § 7031 (SB 263 (Monning) Contractors: unlicensed activity)

If this bill is passed it would amend Business and Professions Code §7031 slightly by prohibiting a person engaged in the business or acting in the capacity of a contractor from bringing an action for collection of compensation for the performance of an act or contract for which a contractor's license is required without alleging that he or she was duly licensed during the performance of that act or contract for which the person is seeking compensation. It would also make amendments to a few other code sections and add Business and Professions Code section 7026.4. A piece of legislation changes so much from conception before it gets to the Governor's desk (if it gets there) that it is not possible to tell what this bill will end up looking like.

License Qualifiers - B&P § 7068.1 (SB 262 (Monning) Contractors)

This would amend the law to discipline qualifiers on licenses who fail to comply with supervision and control requirements, regardless of the harm or potential harm to consumers.

Arbitration - B&P § 7085.5 (SB 993 (Linder) Contractors: arbitration)

This bill would increase the clarity of the arbitration process for both homeowners and contractors and would be more in line with current case law and best practices.

Aiding and Abetting Unlicensed Activity - B&P § 7114 (SB 261 (Monning) Contractors: fraudulent use of license)

This bill would provide that any licensed or unlicensed person that commits specific unauthorized activities would be subject to administrative remedies as well as civil or criminal remedies. This would delete reference to Section 7099.

Delinquency Renewal Fee - B&P § 7141

This would establish a 30-day grace period for the delinquency fee for license renewal applications that originally are submitted timely but that require correction.

LICENSING COMMITTEE REPORT

LICENSING PROGRAM UPDATE

License Application Workload

The number of applications continues to decline because of the economic recession and housing downturn. The average number of original applications per month during Fiscal Year 2011/12 is down 8% from the previous Fiscal Year.

Limited Liability Companies

CSLB has implemented the new LLC program. During the first year of the program, 169 licenses were issued. Since there is no case law for LLC's yet, an additional $100,000 bond is required for the benefit of workers relative to payment of wages and fringe benefits. This is to ensure workers are protected despite the absence of case law dealing with LLC's. Note that this bond is in addition to the $12,500 contractor bond. LLC's are also required to have $1,000,000 in liability insurance when five or fewer persons are listed as personnel, with an additional $100,000 required for each additional personnel, not to exceed $5,000,000.

Since the CSLB has implemented the program through to December 31, 2012, they have received 667 applications for LLC licenses. The most common reason for the rejections is being unable to confirm the LLC name with what the Secretary of State is able to provide since the Secretary of State has such a delayed processing time.

Workers' Compensation Recertification

Due to AB 397, which became effective January 1, 2012, the Licensing division implemented a new program where at the time of renewal of an active contractor licensee, there is a need to recertify the licensee's exemption or provide a current valid Certificate of Workers Compensation Insurance of Certificate of Self-Insurance. Since the law went into effect, the CSLB has started implementing these requirements for licensees expiring March 31, 2013. So far, they have sent notification to approximately 8,000 currently exempt licensees.

Fingerprinting/Criminal Background Unit

Since fingerprinting and criminal background checks were implemented, CORI files received through December 31, 2012, the Criminal Background Unit denied 1,126 applications and issued 1,261 probationary licenses. Five-Hundred Sixty-One (561) of the denied licenses appealed their denials. There has also been a decline in fingerprint submissions since there has been a decline in applications.

Licensing Information Center (LIC)

Call Center Workload

Due to the backlog in workers' compensation processing and time spent training new staff, there was a higher call volume in the fourth quarter of 2012. It increased by approximately 7.8% compared to the fourth quarter of 2011. LIC expects the call volume to increase at the beginning of each quarter because of workers' compensation policy renewals.

Staffing Update

Licensing has hired three full-time employees, but still has three vacancies that they are hoping to fill by March, 2013. They have been able to keep their two part-time retired annuitants that work during peak call hours. Unfortunately, licensing has lost their four student assistants due to those positions being eliminated. This has impacted licensing's workload as work has been shifted to full-time staff.

Increased Training

One of the Licensing division's goals is to provide timely, efficient and professional services to its customers. They have established a trainer position as an expert resource to other licensing staff. Training has proven to be an effective way to give the new employees an in-depth look at CSLB as a whole and the roles of the various units within it. In July they held a training program for 30 new employees. CSLB has another orientation planned for new employees during the first quarter of 2013.

Call Center/LIC Processing

A call center processing e-mail address has been set up as a full-service resolution program for licensees who need their licenses updated to satisfy a suspension or to avoid suspension. Having this capability allows for some matters to be resolved on the spot and prevents the callers from being transferred to other processing units. The call center can now scan and email renewal applications to licenses whose license is due to expire within a month. So far, licensees have been pleased with this increased level of service.

Judgment Unit

The judgment Unit processes all outstanding liabilities, judgments and payment of claims reported to the CSLB by licensees, consumers, attorneys, credit recovery firms, bonding companies, CSLB's Enforcement Division and other governmental agencies as well as processing all documentation and correspondence related to resolving these issues.

TESTING DIVISION UPDATE

Examination Administration Unit

The Examination Administrative Unit administers the 45 tests of the CSLB at eight different locations. From February 2012 through January 2013, except for three months, there have been over 3,000 exams scheduled.

Examination Administration Staffing

After a 15 month vacancy, the Staff Services Manager I position that supervises the Examination Administration Unit was finally filled with an internal employee. This has created a vacancy in the analyst position, which the CSLB hopes will be filled as soon as the DCA corrects some position control issues.

The San Jose testing center has one test monitor vacancy. Part-time proctors are being used until someone is hired. All of the other testing centers are fully staffed.

Training Center Status

There are eight testing centers - Sacramento, Oakland, San Jose, Fresno, Oxnard, Norwalk, San Bernardino, and San Diego. The Oakland testing center will soon be moving to Berkeley. Plans at the new center are currently being drawn.

Examination Wait Time

The current wait time for examinations throughout the state is three weeks. Just as in the past, applicants have a very good chance of obtaining a seat in any CSLB testing center on a walk-in basis.

Utilization of Testing Centers for Other Projects

The Norwalk and San Bernardino testing centers have been used by the DCA to train other Boards on the new BreEZe software. The testing centers are also being used to give the Enforcement Representative I exam twice a year.

Examination Development Unit

The Examination Development Unit ensures 45 examinations are maintained and updated in accordance with testing standards, guidelines and regulations.

Examination Development Unit Staffing

There is still one vacant testing specialist position. It is hard for CSLB to find a qualified applicant because the position is very specialized.

Occupational Analysis and Examination Development Workload

There are two phases in the development process: occupational analysis and new examination development. These must be done every five to seven years for each examination.

New examinations have been completed for:

• C-42 Sanitation Systems
• C-47 Manufactured Housing

Current occupational analyses in progress:

• C-5 Carpentry
• C-28 Lock & Security Equipment
• C-38 Refrigeration
• C-60 Welding

New Examinations in Progress

• C-34 Pipeline
• C-45 Signs
• C-46 Solar
• C-50 Reinforcing Steel
• C-55 Water Conditioning
• C-57 Well Drilling
• Hazardous certification

Ongoing Consumer Satisfaction Survey

The Testing division conducts this survey of consumers whose complaint cases have been closed. This is designed to assess the overall satisfaction with the Enforcement division's handling of complaints in various content categories. The 2012 report will be ready for the next Board meeting. Stay tuned to see how it went.

CONSIDERATION OF AN ASBESTOS ABATEMENT SPECIALTY CLASSIFICATION

A representative of the Association of Environmental Contractors spoke to board members about the need for a license classification for people who remove asbestos and other hazardous material. There is no specific license classification for this type of work. The Board has requested that staff investigate the need for a specialty license for individuals and companies that perform this type of work.

EXECUTIVE COMMITTEE REPORT

ADMINISTRATION AND INFORMATION TECHNOLOGY UPDATE

Administrative Program Update

Personnel Update

As of February 5, 2013, there are 32.5 vacant positions at the CSLB. The Enforcement division has the most vacancies with 15 vacancies. The Executive and Public Affairs divisions do not have any vacancies at this time.

Business Services Update

Some of the Business Services Unit updates for the 2012 calendar year included: relocating Fresno SWIFT, reconfiguring the Oxnard Testing office so that candidates now have enough room at each workstation, completed plans to add a public counter with bullet proof glass at the San Bernardino office, executed 12 contracts for various services, purged more than 100,000 files from the file room.

Information Technology Division Update

BreEZe

BreEZe will include e-payment/online licensure; renewals, and on-line complaints once it is implemented. The "go-live" date has already been pushed back several times and the latest date they were hoping to "go-live" of February 2013 has also been pushed back. They are currently trying to determine a new "go-live" date.

AB 397 - Workers' Compensation Insurance Exemption Recertification

AB 397 indicates that at the time of a license renewal, an active contractor's licensee with an exemption from workers' compensation insurance must either recertify the exemption or provide current and valid workers' compensation coverage to prove that exemption. The staff has now completed the necessary changes for this implementation.

Help Desk

The Help Desk staff processes an average of 367 tickets a month. These are by employees who have issues with phones, desktops, laptops, printers etc. Incoming tickets are reviewed and assigned within 15 minutes. Tickets are usually resolved within 30-60 minutes.

CSLB Green IT Efforts

• Consolidated office equipment. Individual printers, faxes and scanners were replaced with 37 multifunction copier machines.
• Legacy phone systems being replaced with Voice over Internet Protocol (VoIP) phones.
• Converted mainframe print jobs from SNA printers to IP printers allowing reports to print at multiple locations, eliminating the need for multiple printing systems.
• Created self service report center converting paper reports to Adobe PDF on CSLB Intranet website.
• Enhanced electronic bond filing process providing letters and reports directly to bonding companies through Adobe PDF format.

Interactive Voice Response (IVR) System

This is a self-directed phone system for consumers, contractors and more. Callers have the ability to request pamphlets that are immediately faxed to them. They can also look up a license, check status of exam applications, and receive information on how to file complaints etc. It is available 24/7. The top two IVR requests are Contractor or Want to Become Contractor and Info on Maintaining or Changing License.

BUDGET UPDATE

Fiscal Year 2012-13 CSLB Budget and Expenditures

The CSLB spent $27.9 million, 48% of its Fiscal Year 2012-2013 final budget through December 31, 2012.

Revenue

The revenue through December 31, 2012, was $30,149,404. This was a 2.6% increase from the prior year.

FY 2012-13 CSLB Budget and Adjustments

The CSLB's revised final budget for the fiscal year 2012-13 is $58.5 million. This includes some one-time adjustments including reduction of salaries and wages.

CSLB Fund Condition

The Contractor's License Fund for the Fiscal Year 2011-12 had 5.8 months in reserve. The projected fund for the Fiscal Year 2012-13 is 5.9 months in reserve.

Construction Management Education Account (CMEA) Final Fiscal Year 2012-13 Budget and Expenditures

Through December 31, 2012, CMEA spent approximately $6,800 in pro rata charges.

CMEA Fund Condition

For the Fiscal Year 2011-12 there was 31.1 months in reserve. They are projecting only 26 months in reserve for the 2012-13 Fiscal Year and continuing to decline with an estimated 16.2 months in reserve for the 2014-15 Fiscal Year.

Statistics Summary

The following is the statistical summary for the 2012-13 Fiscal Year:

• Applications Received - 4.5% increase from previous Fiscal Year
• Original Licenses Issued - 9.1% decrease from previous Fiscal Year
• Licenses Renewed - 3.7% decrease from previous Fiscal Year
• Home Improvement Salesperson Registrations Renewed - 12.8% increase from previous Fiscal Year

STATUS OF 2012-2013 STRATEGIC PLAN OBJECTIVES

The following objectives are either completed or on track:

• Implement workers' compensation insurance recertification process for those who are exempt from coverage
• Work with EDD to develop outreach packet to educate about dangers of underground economy.
• Develop plan to explore licensure for solar/alternative energy contractors
• Increase exam testing from 2.5 to 3.5 hours
• Submit Sunset Review Report, Legislative 3^rd Quarter 2014

The following objectives have new target dates:

• Complete flagship contractor and consumer publications
• Develop a contractor outreach program
• Develop a contractor presentation kit
• Create website section with streamlined access to contractor outreach materials
• Develop CSLB style guide and identification standards manual

There are also various other objectives that are in different stages of being met. These were just a few highlights

DISCUSSION REGARDING STRATEGIC PLANNING PROCESS

The CSLB's next general Board Meeting will be their annual Strategic Planning meeting, which will be held in San Diego. This year, the Department of Consumer Affairs SOLID office (Strategic Org...) will be overseeing this important meeting. Board members will be briefed between now and then as to an overview of what is going to happen at the April meeting.

REVIEW OF TENTATIVE SCHEDULE

April 23-24, 2013 in San Diego - Strategic Planning

June 11, 2013 in Orange County - Joint Meeting with Nevada Board

Abdulaziz, Grossbart & Rudman

provide this information as a service to its friends & clients and it does not establish an attorney-client relationship with the reader. This document is of a general nature and is not a substitute for legal advice. Since laws change frequently, contact an attorney before using this information.

Abdulaziz, Grossbart & Rudman

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